Are a hotel-industry providers online reputation and survey products taxable information services?

Plain-English summary

A company sells Internet-based products to hotels to help their marketing: Product A (online reputation management — aggregates the hotels reviews from 60+ public review websites, plus dashboards, sentiment analysis, competitor comparisons, response tools); Product B (post-stay guest surveys the company sends and tabulates); Product C (on-site iPad guest surveys); and Product D (a package of A+B+C). It asked whether these are taxable.

The Office of Counsel concluded:

• All four are information services — the company collects, compiles, and analyzes data and gives hotels access to it (Tax Law section 1105(c)(1); 20 NYCRR 527.3(a)(2)). The various tools have some attributes of prewritten software, but the predominant element is creating a database of information for the customer.
• Product A — taxable. Its information comes from 60+ public, third-party review websites — a common, widely accessible source — so it is not personal/individual, even though displays/reports can be tailored to the customer (ADP; Rich Products). (Contrast Westwood Pharmaceuticals, where the data came from the customer itself.)
• Products B and C — excluded (personal/individual). Their information comes from surveys of the hotels own guests, not a common source — so they qualify for the exclusion, so long as the information is not provided to other customers or compiled for later use for others.
• Product D (bundle) — taxable in full on a single charge. Because it mixes taxable and nontaxable components, the single charge is fully taxable — unless each components charge is separately stated, reasonable, and the components are available separately, in which case the company can tax only the Product A portion (20 NYCRR 527.1).

What this means for you

The personal/individual test is about the source

An information service drawn from a common, public, or widely accessible source (like aggregating public reviews) is taxable, even if the output is customized. One built from the customers own data (here, surveys of the customers guests) can be personal/individual and exempt — but only if you dont reuse that data for other customers.

Customization doesnt save common-source data

Tailored dashboards, sentiment scores, and competitor comparisons dont make public-source information personal/individual. What matters is where the underlying data comes from.

Separately state to avoid taxing the whole bundle

If you sell a package of taxable and non-taxable services, the entire single charge is taxable unless you separately state each charge (reasonably) and offer the components separately. Then you tax only the taxable piece.

Common questions

Q: Product A is customized to each hotel — why is it taxable?
A: Because its data comes from 60+ public review websites, a common and widely accessible source. Customized displays dont make common-source information personal or individual.

Q: Why are the survey products (B and C) exempt?
A: Their information comes from surveys of the hotels own guests, not a common source, so they are personal/individual — as long as the data isnt provided to or compiled for other customers.

Q: How is the A+B+C bundle (Product D) taxed?
A: The single charge is fully taxable unless each component is separately stated, reasonable in amount, and available separately; then only the Product A portion is taxed.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1105(c)(1) (tax on information services; personal-or-individual exclusion)
• Tax Law section 1105(c)(9) (information services furnished by telephony/telegraphy)
• 20 NYCRR 527.3(a)(2) (collecting/compiling/analyzing information is an information service)
• Matter of ADP Automotive Claims Service v Tax Appeals Tribunal, 188 AD2d 245 (3d Dept 1993) (common-source/widely-accessible data is not personal/individual)
• 20 NYCRR 527.1 (single charge for taxable and nontaxable components)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_26s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(26)S
Sales Tax
August 31, 2016

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S140929A

The Department of Taxation and Finance received a Petition for an Advisory Opinion
from
REDACTEDREDACTEDREDACTEDREDACTEDREDACTEDREDACTED
(“Petitioner”). Petitioner, which provides Internet-based products to the hotel industry,
essentially asks whether its products are subject to New York State sales and use tax. We
conclude that all of Petitioner’s products are information services for purposes of the sales and
use tax, but that two of them qualify for the “personal or individual” exclusion from the tax on
information services.
Facts
Petitioner is in the business of selling products to hotels and hotel management groups
(customers) that, according to Petitioner, “provide feedback and information to its hotel
customers to facilitate the hotels’ marketing and sales to prospective customers.” Petitioner
indicates that it sells four products, including one that it calls online reputation management
services (Product A), another that it calls post-stay surveys (Product B), and a third that it refers
to as on-site surveys (Product C). Petitioner also offers a product, which it calls “Guest Suite”
(Product D), that integrates Products A, B and C.
Product A: Product A provides customers with online access to a database that is
maintained by Petitioner, and that consists of hotel reviews from over 60 hotel review websites.
Product A lets customers log in to Petitioner’s website and, in one place, see all of the reviews
from these websites that pertain to them. Product A also provides customers with information
that is derived from these reviews. For example, when a customer logs onto Petitioner’s website
it may see a “dashboard” with information such as the number of new reviews about that
customer, the average rating given by guests in these reviews, the percentage of reviews in which
guests “recommend” the customer, and a breakdown of the websites that these reviews
originated on. Product A also allows customers to compare their ratings to those of competitors,
and offers information such as “trending topics” that appear in reviews and a “sentiment
analysis,” which is an analysis using a language processing system that determines whether
reviews are positive or negative and what subjects (i.e., rooms, service, cleanliness, facilities,
etc.) are addressed. As part of this “sentiment analysis,” Petitioner assigns numeric ratings to
each of these subjects using a rating system it designed. Product A further provides customers
with reports containing information culled from reviews, and also provides them with tools that
allow them to respond to individual reviews (with the response appearing on the review website
where the review originated), to share reviews via e-mail or social media, or to assign the
responsibility for responding to reviews to others (i.e., to create “service tickets”). In addition,
Product A allows customers to save reviews or delete them from their viewing screen.

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Product B: Like Product A, Product B provides customers with online access to a
database maintained by Petitioner. However, unlike Product A, the information that Product B
supplies to customers is derived from survey questions that are prepared by Petitioner and sent to
guests after they have completed their stay with a customer. According to Petitioner, the survey
questions that are sent to guests can be customized for each customer, and they ask questions like
“how would you rate the service you received,” or “did any staff member provide exceptional
service.” Once a survey is completed, the results are tabulated by Petitioner and made available
to customers in much the same way as Product A. For example, customers that use Product B
are able to log in to Petitioner’s website and read survey comments made by guests. In addition,
Product B tabulates the results of surveys and provides customers with information, such as the
number of surveys sent and the average rating the customer received. Product B also provides
customers with a “sentiment analysis” of survey responses, offers reports that customers can
customize, and provides some of the same tools that Product A offers, including the ability to
share comments, create “tickets,” and save and delete comments. Petitioner indicates that
Product B also allows customers to create or edit surveys, to edit e-mail content that is sent to
guests, and to customize their use of Product B. In addition, literature provided by Petitioner
reflects that customers can use Product B to submit survey responses to what Petitioner describes
as the “world’s largest online review site.”
Product C: Product C is similar to Product B in that it essentially collects survey
information from a customer’s guests and makes the results of these surveys available to
customers via Petitioner’s website.
The main difference between Product B and Product C,
however, is that the surveys conducted for Product C are completed by hotel guests at the time of
their hotel stay on iPads provided by the customer to the guest. When a guest answers the survey
questions, the results are transmitted to Petitioner, which tabulates the results and makes them
available to the customer “in a similar way as is done for [Product B].”
Product D: Lastly, Product D is a single product that integrates Product A, Product B
and Product C. In other words, Product D appears to be a package that includes all of the
products described above.
Analysis
The Tax Law imposes sales and use tax on retail sales of tangible personal property,
including prewritten software, and the sale, except for resale, of certain services. See Tax Law
§§ 1101(b)(6); 1105(a), (c). Among the services subject to tax is the furnishing of information
by printed, mimeographed or multigraphed matter or by duplicating written or printed matter in
any other manner, including the services of collecting, compiling or analyzing information of
any kind or nature and furnishing reports thereof to other persons. See Tax Law § 1105(c)(1).
See also Tax Law § 1105(c)(9) (furnishing information services provided by means of telephony
or telegraphy or telephone or telegraph service of whatever nature subject to sales tax so long as
such would be subject to sales tax pursuant to Tax Law § 1105(c)(1) if it were furnished by one
of the means enumerated therein).

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Each of Petitioner’s products has a number of components. The provision of various
tools to customers, such as the ability to respond to reviews posted on review websites (Product
A), or the ability to create and/or edit surveys or share survey responses (Products B and C), has
some attributes of the sale of prewritten software. However, when looked at as a whole, and
based on the facts provided by Petitioner, the predominant element of Petitioner’s products is the
creation of a database of information that is pertinent to their customers’ businesses. Petitioner
accomplishes this by collecting information from review websites or directly from guests,
processing it, and giving customers access to this information in various ways, including access
to the raw data collected (i.e., the actual reviews or comments) or through reports and/or analysis
of the data. This includes the “sentiment analysis” that Petitioner provides to its customers,
which, as described above, is Petitioner’s unique way of reviewing the data that it collects,
analyzing it, and quantifying it for its customers. The process of collecting, compiling and
analyzing information is the very essence of an information service. See NY Tax Law §
1105(c)(1); Sales Tax Reg. § 527.3(a)(2). See also TSB-A-15(1)S.
However, not every sale of an information service is subject to sales and use tax.
Explicitly excluded from the tax on information services is, among other things, the furnishing of
information that is personal or individual in nature and which is not or may not be substantially
incorporated in reports furnished to other persons. See Tax Law §1105(c)(1); see also Tax Law §
1105(c)(9). Information is not “personal or individual in nature” for purposes of this exclusion if
it comes from a common source or a data repository that itself is not confidential. See Matter of
ADP Automotive Claims Service Inc. v Tax Appeals Tribunal, 188 AD2d 245 (3d Dep’t 1993),
Allstate Insurance Company v. State Tax Commission, 115 AD2d 831 (3d Dep’t 1985), aff’d. 67
NY2d 999 (1986).
In this case, Products B and C may qualify for the “personal or individual” exclusion
from sales tax on information services because the source of the information that they provide is
not a common or non-confidential source. Rather, the information that is provided to customers
in Products B and C is derived from surveys of the customer’s hotel guests. Accordingly, so
long as the information collected for Products B and C is not provided to other customers or
compiled for later use by Petitioner in providing information to other customers, these two
products would be excluded from sales and use tax. See, e.g., TSB-A-10(40)S (provision of
information derived solely from responses to customer’s questions, that was not provided to
other customers, and that was not compiled for later use by the petitioner in providing
information to other customers, qualified for the “personal or individual” exclusion).
By contrast, however, Product A offers information to customers that is derived from
review websites operated by third parties. This information does not appear to be unique to
Petitioner and is presumably available to the general public (albeit spread out over 60 different
websites). Such information, therefore, comes from a common and widely accessible source
and is not “personal or individual,” even though reports, screens, or displays of the information

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provided to customers may be tailored to their needs or requests. See, e.g., Matter of ADP
Automotive Claims Service Inc., 188 AD2d at 248 (information services derived from a common
source or a data repository that is not confidential and is widely accessible is not personal or
individual in nature); Rich Products Corp. v. Chu, 132 AD2d 175, 177-78 (3d Dep’t 1987)
(reports that are customized to respond to needs of a particular customer not entitled to exclusion
where information was derived from a repository that was not confidential and was widely
accessible). See also, e.g., TSB-A-10(50)S; TSB-A-10(19)S; TSB-A-09(55)S. Product A,
therefore, is an information service that is not personal or individual in nature and is subject to
sales and use tax.
We note that Petitioner attempts to analogize all of its products (including Product A) to
the situation presented in Westwood Pharmaceuticals, Inc. v. Chu, 558 NYS 2d 444 (Sup.Ct.,
Erie Co. 1990), where the Court found that the information service at issue was “personal and
individual in nature” and, thus, excluded from taxation. See Id. at 497. However, in Westwood
Pharmaceuticals, most of the raw data that the vendor collected (and that was used to provide
information to its customer) was derived from the customer itself.
See, Westwood
th
Pharmaceuticals, Inc. v. Chu, 164 AD2d 462, 464 (4 Dep’t 1990). This is a material difference
between the situation presented in that case and the one presented here.
Finally, and as noted above, Petitioner offers Product D, which is described as a package
that includes all of the above-described products. Because Product D includes both taxable and
nontaxable components, Petitioner must collect tax on its single charge for Product D. See 20
NYCRR § 527.1; TSB-A-10(57)S; TSB-A-03(11)S. However, because the components are
available for sale separately, if the charges for each of the above-described services are
separately stated on a customer’s statement and are reasonable in relation to the entire charge,
Petitioner may collect sales tax on the separately-stated charge for Product A. See, e.g., TSB-A3(11)S (noting that where sales of taxable and non-taxable items are sold for a single charge, the
entire charge is subject to the tax unless charges for non-taxable items are separately stated, are
reasonable in relation to the total charges, and the non-taxable items may be purchased
separately).

DATED: August 31, 2016
/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the

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person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.